September 24, 2015 

Submitted via email: e-ORI@dol.gov 

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

ATTN: Conflict of Interest Rule 

U.S. Department of Labor, Room N-5655 

200 Constitution Avenue NW 

Washington, DC 20210 

Re: Definition of the Term “Fiduciary”--Conflict of Interest Rule 

 Retirement Investment Advice; Proposed Rule 

 RIN 1210-AB32 

Dear Ladies and Gentlemen: 

The American Federation of Teachers (AFT) is pleased to submit comments on the 

Department of Labor’s (DOL) proposal to revise the definition of “fiduciary” of an employee 

benefit plan under the Employee Retirement Income Security Act (ERISA). As a national 

labor union representing 1.6 million educators, hospital workers, and state and local 

government workers, AFT has a vital interest in seeing that the retirement security of our 

members is protected. 

Individual Retirement Accounts (IRAs) are one of the leading vehicles for retirement savings 

in our country, currently accounting for $7.4 trillion in assets. The primary reason for the 

growth of IRA assets is rollovers of lump sum and partial lump sum distributions from ERISA 

and non-ERISA plans, including 403(b)’s and 457’s, into IRA’s. Yet, DOL’s current guidance 

excludes virtually all distribution recommendations from the regulatory definition of 

fiduciary investment advice, even when that advice is combined with recommendations 

about how to invest a distribution through an IRA. As a result participants can be steered out 

of retirement plans and be shifted to IRAs with high fees and inferior returns by financial 

advisers who are not required to act in the retiree’s best interests. We therefore strongly 

support the DOL proposal to extend the fiduciary definition to include recommendations 

made to plan participants to withdraw or roll over assets from a plan, regardless of whether 

the plan is an ERISA covered plan, and invest them in an IRA, as well as recommendations 

about how to allocate assets inside the IRA. 
Proposed Rule RIN 1210-AB32/Page 2 

The decision on whether to take a lump sum distribution from a pension plan can have an 

important effect on a participant’s retirement security. For many, deciding what to do with 

the accumulated funds in their 401(k), 403 (b) or 457 account is one of the most important 

decisions they will make regarding their living standards in retirement. In the worst cases, 

the recommendation to move assets from a 401(k), 403(b) or 457 plan to an IRA can lead to a 

loss of plan benefits, higher fees, investment options with poor returns, and a lower standard 

of living. 

The impact of such a decision can also be especially harmful in a defined benefit pension 

plan where the participant gives up the right to an annuity benefit for life, as well as the joint 

and survivor annuity. While there may be situations where a lump sum or partial lump sum 

may be warranted, in many cases such a distribution can put the retirement security of the 

worker and their spouse in jeopardy. Moreover, the decision to take a lump sum distribution 

from a defined benefit pension at retirement may lead to a loss of other valuable benefits like 

retiree health care and a COLA. 

Some brokers, agents, and advisors are provided incentives to recommend, and in some 

cases direct rolled over assets into specific investments, without regard to the worker’s best 

interests. According to a While House Council of Economic Advisers analysis, these conflicts 

of interest have led to annual losses of about $17 billion per year in lost retirement security. 

Therefore requiring that the investment advisor, insurance agent or broker who 

recommends such a move have a fiduciary duty to act in the best interests of retirement 

investors and that an advisor’s financial conflicts of interest be eliminated or mitigated are of 

critical importance. Moreover, once the money is transferred to the IRA, we agree that the 

advisor should have a continuing duty to make recommendations that are in the best 

interests of the retirement investor. 

We appreciate the opportunity to comment on the proposal and thank the DOL for 

developing this new framework for defining a fiduciary in today’s world. 

 

Sincerely, 

John D. Abraham 

Manager, Research and Strategic Initiatives Department 

American Federation of Teachers